Staff drop hits two-year high at UBS's investment bank

UBS’s second-quarter results, published on July 29, showed that headcount at the more than 5,000-staff strong investment bank fell by 204 in the three months to June 30.

A document published by the bank as part of the results providing historical figures for the investment bank for the past two years showed the quarterly drop in staff numbers was the biggest since at least the second quarter of 2014.

UBS did not specify how many people had left the investment bank as part of the group’s long-term plans to cut its costs; the second quarter is typically a busy time for personnel moves as the annual bonus season has just ended.

A presentation alongside the results showed that personnel costs at the investment bank fell 16% to Sfr791 million in the second quarter from Sfr940 million a year earlier. The bank said the drop was in line with revenues and “mainly due to lower performance-related variable compensation and a decrease in headcount”.

In remarks made on an earnings call to discuss the results, UBS’s chief financial officer Kirt Gardner said the drop in staff costs also reflected “decisive action to right-size our business to reflect market conditions” during the quarter.

The drop in both staff numbers and costs at the investment bank came as UBS said it had achieved its Sfr1.4 billion of group-wide cost savings as of June 30 and was “making progress” towards the Sfr2.1 billion target set for the end of 2017.

At the investment bank, which under chief executive Andrea Orcel now operates as two business lines – corporate client solutions, comprising capital markets, advisory and financing, and investor client services, comprising the trading business – revenues fell on both fronts from a year earlier.

Revenues from corporate client solutions dropped 18% to $ 668 million, with debt capital markets the only bright spot as revenues rose 31% to $ 237 million, the group’s best result from that business since the fourth quarter of 2014. Equity capital markets, a sector that has been hit badly for most banks by the market volatility this year, dropped 42% to $ 195 million. Advisory revenues fell 9.7% to $ 166 million.

In investor client services, revenues from foreign exchange, rates and credit rose 12% to $ 461 million “reflecting higher client activity and market volatility levels, partly driven by the outcome of the UK referendum on EU membership”, the bank said.

However, this was not enough to offset a decline in the equities business, where revenues fell 22% to $ 878 million “primarily reflecting lower trading revenues, largely driven by a decline in client activity and strong Q2 2015 revenues”.

Adjusted pre-tax profits at the investment bank, excluding various one-off costs, fell 27% from a year earlier to Sfr447 million.

In its quarterly report, UBS said of the June 23 vote for the UK to leave the EU: “Limitations on providing financial services into the EU from our UK operations that could arise following the UK’s exit from the EU could require us to make potentially significant changes to our operations in the UK and our legal structure.”

UBS group chief executive Sergio Ermotti said on the earnings call that “the slowdown in economic growth, the challenging interest rate environment and geopolitical turmoil – including Brexit – intensified the storm of uncertainty in the industry” during the second quarter.